Student loan forbearance provides temporary relief for borrowers facing financial hardship, allowing them to pause or reduce payments. However, interest typically continues to accrue during this period, and borrowers may face long-term financial consequences if they don’t manage their loans carefully.
Can You Still Make Payments During Forbearance?
Yes, borrowers can make voluntary payments on their student loans during forbearance or stopped collections, even though they are not required to do so. Making payments during this period can help reduce accrued interest and prevent it from being added to the loan principal when forbearance ends.
This approach is particularly beneficial for borrowers with Federal Family Education Loan (FFEL) Program loans, where unpaid interest may capitalize and increase the principal balance after forbearance. Payments made during forbearance first cover any accrued interest and then reduce the principal, ultimately lowering the total repayment amount over time.
However, borrowers aiming for Public Service Loan Forgiveness (PSLF) or forgiveness under income-driven repayment (IDR) plans should be cautious. Payments made during forbearance do not count toward qualifying payments for these forgiveness programs.
Why Income-Driven Repayment Might Be a Better Option
Before opting for forbearance, experts recommend exploring income-driven repayment (IDR) plans. These plans adjust monthly payments based on income and family size, with payments potentially as low as $0 per month. Importantly, borrowers on IDR plans continue to make progress toward PSLF or loan forgiveness, even if their payment is $0.
For most federal loans, interest does not capitalize at the end of forbearance, but FFEL loans not managed by the Department of Education are an exception. Interest capitalization can significantly increase the total repayment amount.
How to Apply for Forbearance
To request forbearance, borrowers must submit an application along with the necessary documentation to their loan servicer. There are two types of forbearance:
- General (Discretionary) Forbearance: Approved at the loan servicer’s discretion.
- Mandatory Forbearance: Granted if borrowers meet specific eligibility requirements.
Smart Financial Planning During Forbearance
For borrowers who can afford it, making voluntary payments during forbearance can reduce overall loan costs. However, understanding how these payments interact with forgiveness programs and interest accrual is essential.
For personalized advice, visit Studentaid.gov or consult your loan servicer for tailored guidance.
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